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Trump Administration to Call for Modest Changes to Banking Rules

(Bloomberg)—The Treasury Department’s much anticipated report on banking regulations is set to include measured proposals for revising post-crisis rules, indicating the Trump administration is more focused on scaling back the 2010 Dodd-Frank Act than blowing it up.

The review, which may be released late Monday, is designed to provide a road map for regulatory agencies to begin chipping away at strictures put in place after the 2008 market crash, a person familiar with the matter said. Among the major targets are the Consumer Financial Protection Bureau and the so-called Volcker Rule than bars banks from making speculative bets with their own capital, the person added.

Still, the report isn’t likely to be an outline for doing “a big number” on Dodd-Frank, as President Donald Trump has vowed. Instead, it is designed to offer policy prescriptions that regulators could achieve on their own, underscoring the difficult task of getting legislation through Congress.

The 150-page document is the result of an executive order that Trump signed at the beginning of February. While the study seeks to open another front in the administration’s deregulatory agenda, it’s not clear how it will play on Capitol Hill where health care and tax reform are more pressing priorities. In addition, House Republicans have pursued a much more aggressive approach to revamping financial rules.

Sweeping Bill

Last week, the House passed a sweeping bill that would dismantle many of the constraints the Obama administration imposed on Wall Street. But that legislation has little chance in the Senate unless it is moderated significantly because it would need Democratic votes. Democrats have largely opposed re-opening Dodd-Frank, arguing that the law is needed to hold big banks accountable after their risky trading helped fuel the meltdown.

Some of the Treasury’s recommendations will require congressional action, although other parts of the report will simply identify problems and not offer specific solutions, said the person, who spoke on the condition of anonymity because the report hasn’t been released publicly. Those issues would need to be debated by regulators.

Even getting smaller fixes through the agencies may be problematic until the administration gets its own appointees at key regulators such as the Federal Reserve, the Federal Deposit Insurance Corp. and the CFPB.

The report is likely to suggest stripping some powers from the consumer agency, including its authority to examine banks. However, the person said, it will probably advise that the agency keep its current structure, with a single leader. The Treasury will recommend that the president have greater authority to fire the director -- an issue that is now being debated in federal court.

Volcker Tweak

On the Volcker Rule, the Treasury review will propose changes rather than a full repeal, the person said. One recommendation: small banks with less than $10 billion in assets should be exempt from complying with its requirements.

Another area the report will tackle is the threshold for when a bank is considered large enough for stepped up oversight by the Fed. Though not endorsing a particular level, the Treasury would like to see it increased well above the current $50 billion in assets, the person said.

Spokesmen for the Treasury and the White House declined to comment.

The department’s review was led by Craig Phillips, a former BlackRock Inc. executive who was major fundraiser for Hillary Clinton’s presidential campaign. He is currently a senior aide to Treasury Secretary Steven Mnuchin.

The banking report is one of several the department will release in the coming months to fulfill Trump’s executive order, which demanded a reevaluation of financial rules.

--With assistance from Justin Sink.To contact the reporter on this story: Robert Schmidt in Washington at [email protected] To contact the editors responsible for this story: Jesse Westbrook at [email protected] Gregory Mott